Stark, Thor & Steve are partners, sharing profit & loss in 2:2:1. Stark died on 31 July 2020 & his share of estimated profit to be calculated on the basis of Sale-profit ratio. Sale & Profit for the year ended 31.03.2020 were rs.20,00,000 & rs.4,00,000 respectively. However Sale forthe period of 01.4.2020 to 31.07.2020 was only rs.3,00,000. You are required to pass journal entry for Stark share of profit.
Answers
Answer:
1. Nitin's capital A/c 4000
Tarun's capital A/c 4000
To Amar's capital A/c 8000
(Being adjustment made for reserve assuming that there is no decrease in value of investments)
2. Nitin's capital A/c 4000
Tarun's capital A/c 4000
To Amar's capital A/c 8000
(Being adjustment made for reserve)
3. Nitin's capital A/c 2400
Tarun's capital A/c 2400
To Amar's capital A/c 4800
(Being adjustment made for reserve)
4. Investment fluctuation reserve A/c.................Dr. 30000
To Investments A/c 30000
(Being decrease in the market value of investment adjusted through reserve)
Nitin's capital A/c 2000
Tarun's capital A/c 2000
To Amar's capital A/c 4000
(Being adjustment made for balance reserve)
5. Investment fluctuation reserve A/c.................Dr. 60000
Profit and Loss A/c.............................................Dr. 30000
To Investments A/c 90000
(Being decrease in the market value of investment adjusted through reserve)
Notes:
1. Calculation of gaining and sacrificing ratio
Nitin: 2/5 - 1/3 = 1/15
Tarun: 2/5 - 1/3 = 1/15
Amar: 1/5 - 1/3 = (2/15)
2. It is assumed that the partners decide to maintain the investment reserve in future.
Answer:
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